Four more Harvey Norman franchises stung by ACCC for misleading conduct

Four more Harvey Norman franchisees have been found to have misled consumers by the Australian Competition and Consumer Commission.

Following penalties imposed on a number of Harvey Norman franchises in December 2013, the ACCC has ordered another four businesses to pay a total of $86,000 for making misleading representations to consumers.

It brings the number of Harvey Norman outlets to fall foul of the corporate watchdog to nine, with a decision in relation to a tenth franchisee expected to be made later this year. In total, the franchisees have been ordered to pay $234,000.

The Federal Court ordered a franchise in Oxley, Queensland, to pay $26,000; two franchises in Gordon, New South Wales, and Mandurah, Western Australia, to each pay $25,000; and a fourth WA store to pay $10,000.

The Queensland and NSW stores have also been ordered to display corrective notices in-store and implement a consumer law compliance program. The two WA stores closed in May 2013.

The court found the franchises had each made false or misleading representations to consumers about their consumer guarantee rights.

Examples of the misrepresentations include sales representatives and store managers telling customers their store was not obliged to provide a remedy if a products was still covered by the manufacturer’s warranty or if the product was purchased more than three months ago, and employees telling customers they would have to pay postage and handling fees to return a product to its manufacturer.

ACCC deputy chair Michael Schaper said in a statement the penalties “are a clear message to all suppliers, no matter how big or small, that they must not mislead consumers about their rights under the Australian Consumer Law”.

The director of the Franchise Advisory Centre, Jason Gehrke, told SmartCompany cases of this nature involving individual franchisees can have a number of negative consequences for a business.

“It affects consumer confidence and therefore has the potential to affect nearby or adjacent franchises that were not engaging in the conduct but have been caught in the fallout,” says Gehrke.

Gehrke says the cases also have the potential to damage the reputation of the franchisors in negotiations with other stakeholders such as landlords and suppliers.

“The brand damage to Harvey Norman overall has been probably very small simply because coverage of this behaviour hasn’t really been picked up by mainstream media … This is not the sort of thing most consumers have necessarily come across,” he says.

However, Gehrke says the requirement for the franchisees to display corrective notices will
“be a bitter pill to swallow” for the businesses, as will the court-ordered compliance program.

“There is also a lesson for Harvey Norman as the franchisor to ensure it looks at issues like franchisee training and compliance,” says Gehrke.

“It wouldn’t be a bad idea for the franchisor to take the higher ground and rollout the compliance program to all its franchises,” he says.

SmartCompany contacted Harvey Norman but did not receive a response prior to publication.